8 smart moves to score the best possible mortgage

Paying discount points can lower your interest rate

Paying discount points on your mortgage is like prepaying part of the interest on your loan. You pay money up front in exchange for a lower interest rate for the life of the loan.

One point is equal to 1% of your loan. So if you're borrowing $150,000, a point would cost $1,500.

Each point you buy will knock one-eighth to one-quarter of a percentage point off your mortgage rate, which is less than points would buy a few years ago.

Buying down your interest rate makes sense only if you have extra cash available and you're likely to stay in your home long enough to recoup the up-front cost.

After all, it could take years to break even.

Our mortgage points calculator allows you to decide whether you're better off paying points to lower your interest rate or adding that money to your down payment.